This Morning: Infosys Drops, Apple’s Margins, Yahoo! and Intel Lead the Season

By Tiernan Ray

Here are some things going on this morning in your world of tech:

Shares of Infosys (INFY) are down $3.64, or almost 7%, at $51.94, after the company this morning reportedfiscal Q4 revenue of $2.092 billion and EPS of 85 cents, which was just a hair under consensus revenue estimate of $2.096 billion but above the 80-cent EPS estimate.

The company projected revenue this fiscal year rising 7% to 9%, which is below the 13.2% the Street has been projecting.

CEO S.D. Shibulal remarked that he was “pleased that we have been able to double our growth rate for the full year,” with 2014 revenue up 11.5%. “We remain fully focused on building the growth momentum by making all the necessary investments in our business.”

The market this morning welcomes a new tech player, Paycom Software (PAYC), whose shares are up 60 cents, or 4%, at $15.60, after the issue priced at $15, below the original expected range of $18 to $20. The company is an operator of cloud computing services that help human resources with “human capital management.” The company lists Cornerstone OnDemand (CSOD) and Workday (WDAY) among its chief competitors in its S1 filing.

Shares of Google (GOOG) are down $7.43, or 1.4%,at $525.09, despite a positive note from Jefferies & Co.’s Brian Pitz, who this morning reiterated a Buy rating, and raised his price target to $700 from $650, after removing losses from the Motorola handset business from his spreadsheet, and writing that his survey of the “product listing ad,” or PLA, business for Google, “suggests marketers are continuing to invest heavily in PLAs.”

Speaking of Google ads, in case you missed it, Bloomberg’s Ari Levythis morning offered up an interview with Priceline CEO Darren Huston, who tells him that he is spending “feverishly” to advertise the travel service on Google because he hasn’t found that spending for ads on Facebook (FB) and Twitter (TWTR) yields anything.

Google reports Q1 results tomorrow afternoon, after the closing bell.

Raymond James’s Tavis McCourt this morning reiterates an Outperform rating on shares of Apple (AAPL), and a $550 price target, offering up a “deep dive” into the iPhone’s gross margin prospects for the forthcoming version.

Writes McCourt, “Instead of a mindless earnings preview, we decided to perform a deep dive into iPhone gross margins throughout the last two hardware cycles in the note below. Although we believe gross margins could see a decline with new iPhones, there are mitigating circumstances that we believe may limit this risk relative to the last two cycles.”

McCourt concludes that “gross margin risk may be somewhat overstated,” given that higher costs for things like sapphire screen materials may be offset by savings elsewhere.

“We believe consolidated gross margins may decline by ~70-~300 bp based on scenarios we outline in the note below (vs. 200-400 bp the last two cycles), but iPhone ASPs could increase by mid-single digits y/y with the higher ASP product line, offsetting much of this margin pressure, unlike previous cycles.”

Apple shares are down $5.57, or 1.1%, at $516.11.

Kicking off tech’s earnings season in earnest tonight are Yahoo! (YHOO) and Intel (INTC). Yahoo! shares are down 6 cents at $33.38, while Intel shares are down a penny at $26.55. Analysts continue to prepare their expectations for both.

Cowen & Co.’s John Blackledge, who has a Market Perform rainy on Yahoo! shares, this morning writes that Yahoo! may miss the $1.079 billion revenue estimate for the quarter, instead delivering perhaps $1.06 billion in revenue, given that “display revenue … remains challenging” and will probably drop 6%, year over year. Search revenue may be up 7.6%, but that would be below last quarter’s 8% rise.

Blackledge notes that investors are keenly interested in any details about the timing of an Alibaba Group Holding IPO, and what Yahoo!’s tax liability would be for its 24% stake.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.